Micro-financing forest product industries in Ghana

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The timber industry in Ghana has had a lot of setbacks over the years and specifically in the tertiary production sector because of lack of financial services which is a key component of economic development. This research reports on findings from a micro financing survey of 135 forest products micro-enterprises, 18 formal and 28 informal financial institutions in Accra, Kumasi and Takoradi. The findings revealed that forest products micro-enterprises relied mainly on family members and friends and their own resources to finance their businesses and that there exist a financial service gap between forest products micro-enterprises and formal financial institutions. The study identified financial service gaps representing demands for credit by viable micro-enterprises that could not satisfy the information .and collateral requirements of formal financial institution and these have compelled them not to apply for credit. This has been the case because of formal financial institutions’ stringent requirements for granting loans, which is tied to collateral and proper bookkeeping which cannot be easily met by micro- entrepreneurs. Financial services available from informal financial institutions are limited to small amounts and loan grant periods are also relatively short to create any meaningful impact on production hence the sector in general. These microenterprises however need larger and longer-term loans than informal lenders could provide. Micro-enterprises suggested that repayment of loans if given should be in the form of finished products or a combination of that and cash. Sector associations of micro-enterprises have suggested organization of training and seminars and the use of consultants to help with the preparation of business plans. Based on the suggestions given by the micro-enterprises it has been recommended in this work that a special unit be formed to take care of accepting repayments in the form of finished products.
A thesis submitted to the Department of Wood Science and Technology, in partial fulfilment of the requirements for the degree of Master of Science in Wood Technology and Management, 2000